Australian SMEs seem largely unconvinced that tax cuts and interest rate reductions are enough to stimulate the ailing economy. Yet property buyers appear to have the opposite view.
A recent straw poll conducted on the My Business site found that of the 148 respondents, only a third (36.5 per cent) think these measures by the Reserve Bank and the federal government will have a positive impact on the economy.
But a greater proportion — 48.6 per cent — feel they won’t make a scrap of difference, while a further 6.1 per cent were unsure either way.
Of greatest concern was the fact that almost one in 10 respondents (8.8 per cent) actually feel the cuts will negatively impact the already weak economy.
The Reserve Bank has expressed concerns that our unemployment rate is heading higher and that wages growth will continue to track below average levels.
Meanwhile, inflation has remained below the central bank’s 2 to 3 per cent target band in all but two of the last 16 quarters (four years). It last punched above the 2 per cent level, briefly, in June 2018 (to 2.1 per cent), before falling back to its previous level of 1.9 per cent in the very next quarter.
Property market shows signs of life
Despite the sentiments among the business community, property buyers appear to have regained confidence in the market, with auction clearance rates soaring in recent weeks.
Figures from property data firm CoreLogic revealed an initial clearance rate of 70.4 per cent nationally, meaning that almost three in four homes taking to auction in the week to 11 August found a buyer.
In Melbourne, Australia’s largest auction market, 73.2 per cent of homes sold at or before auction. The figure was even higher in Sydney, with 81.2 per cent of properties sold.
CoreLogic said that, as these results are only preliminary and tend to track slightly lower as final results are compiled, the clearance rate will ease slightly.
However, it noted that figures are strong, which is attributed at least in part to the economic stimulus of interest rate and tax cuts.
“The consistent trend where final clearance rates hold above the 70 per cent mark impl[ies] the market is responding to the stimulus of lower mortgage rates, improved sentiment following the federal election and lower serviceability tests for borrowers as well as low advertised stock levels,” it said.
Stock levels — the number of properties listed for sale at a given point — have plummeted in every capital city over the past 12 months.
The biggest supply shortages of properties put on the market have been in Sydney and Melbourne, with the number of new listings down year-on-year by 28.3 per cent and 23.5 per cent, respectively.
All capital cities, except Darwin, recorded double-digit declines over the past 12 months, according to CoreLogic, while Darwin saw volumes fall by 8.7 per cent.
That lack of supply, combined with greater demand as buyers look to cash in on low interest rates, appears to be driving sales activity, and looks to be arresting the fall in house prices.
CoreLogic said that house prices actually rose over the past month in Sydney (up by 0.2 of a percentage point), Melbourne and Brisbane (both up by 0.1 of a percentage point).
The firm also noted that mortgage market activity has increased over the past month in every state but Tasmania, led by a 10.7 per cent spike in Western Australia.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.